Oil sinks on supply worries; sterling drops on May comments

Mon Jan 9, 2017 4:33pm EST
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By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - Oil prices fell on Monday on fears that record Iraqi crude exports and growing U.S. output could undermine OPEC's efforts to reduce supply, while sterling slumped on comments by British Prime Minister Theresa May suggesting what could be an aggressive exit from the European Union.

Sterling was the big mover in the currency market, falling nearly 1 percent against the dollar to more than two-month lows after May's remarks. May said she was willing to sacrifice the country's single-market membership for more control over its borders.

U.S. Treasury yields retreated in line with British bond yields after the comments.

The drop in oil prices weighed on energy stocks on Wall Street and the Dow Jones Industrial Average moved further from hitting the historic and widely awaited 20,000 mark.

"The (oil) price weakness ... calls attention to some bearish news that the market had been willing to ignore, such as the high level of (fourth-quarter) supply still in transit to consumers and the uptrend in U.S. drilling rigs and actual oil production," said Tim Evans, energy futures specialist at Citigroup.

The Organization of the Petroleum Exporting Countries agreed in November to cut output for the first time since the global financial crisis more than eight years ago.

In late trading, Brent crude LCOc1 fell $2.25, or 2.87 percent, at $54.85 a barrel, while U.S. crude futures slid CLc1 slid nearly 4 percent to $51.87 per barrel.

In the U.S. equity market, declines in energy and financial stocks pressured the S&P 500 and hampered the Dow's pursuit of the 20,000 milestone ahead of earnings season and U.S. policy changes under President-elect Donald Trump.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., January 9, 2017. REUTERS/Lucas Jackson